Taking a Flyer on Privatization

BARRY RASCOVARTHE BALTIMORE SUN

Is aviation giant Lockheed Corp. about to make the state of Maryland an offer it can't refuse? That could be the case as the Schaefer administration ponders the privatization of Baltimore-Washington International Airport.

Lockheed is hungry for non-military business. A $12 billion a year company, it has been in the airport operations business for over 60 years and ranks as the largest private developers and operators of airports on the continent.

BWI would appear to fit in perfectly with Lockheed's ambitions. The airport desperately needs a big ($150 million) international terminal if it is to compete effectively, yet the state may not have the cash. Equally important is the need for high-powered marketing to lure carriers.

That's where Lockheed sees a niche. It has close working relations with most air carriers. It also has been operating airports efficiently for decades. Lockheed officials point with pride to Toronto's ultra-modern Terminal 3, which Lockheed built, privately financed and is now operating for the Canadian government. And it manages the successful international terminal at Atlanta. BWI does seem right up its alley.

Not surprisingly, Maryland officials remain cautious. While Lockheed doesn't want to buy the airport outright (it is seeking a long-term lease to manage and expand it), transportation officials are reluctant to relinquish control. Yet given the economic realities and outlook for the rest of the decade, a privately-run BWI might make sense.

First, the state would be relieved of a huge investment to build an international terminal. That's $150 million available for highway improvements, new light-rail lines or expanded commuter rail services. Other expensive capital improvements would also be handled privately by Lockheed, creating even more money for non-airport projects.

Given the growing problems in raising new funds for the state's transportation trust fund, any move that frees up available cash for additional projects should be encouraged. Another Department of Transportation candidate for privatization: the World Trade Center. Other DOT facilities may also lend themselves to private operations, or even private ownership.

Also, private management of the airport might mean better management. The profit motive encourages efficiencies and better customer service. Government operations are usually cumbersome and inefficient.

No state can compete on a marketing level with a giant like Lockheed. The key to a successful overseas terminal will be filling it with air carriers as tenants. Based on the state's spotty track record in luring airlines to BWI, there's a chance an international terminal could flop for lack of business. Lockheed argues it has shown it can avoid such a calamity.

Virtually everything at the airport already is privately run -- the concessions, the airlines and the rental cars. Why not let an aviation specialist manage the rest?

Finally, privatizing BWI may be the only way to survive the future expansion plans of Dulles International Airport.

BWI at the moment is in a delicate situation. Its main carrier, USAir, continues to operate in the red. Moreover, USAir's new hub in Philadelphia raises troubling concerns about the future of the airline's BWI hub. Maryland's airport has to be made more appealing to its major air carrier.

But that will require heavy investments the state might not be able to make. Meanwhile, Dulles has ample funds for a vast expansion to the south. Turning to a well-heeled, private company could be the best way out of this bind.

To clinch the deal, Lockheed is negotiating with a big local corporation to make a joint proposal to the state. The local tie-in would underline the importance of the BWI undertaking to Lockheed, which sees the Maryland airport as a prime turnaround candidate -- an underutilized gem with vast potential. A successful privatization of BWI could pave the way for other efforts in Los Angeles, Boston and New York.

Persuading transportation officials to let go of their airport could prove difficult. No bureaucrat likes to give up territory or power. Yet the public is demanding that government reform and downsize itself. Privatization is one intriguing approach. DOT secretary Jim Lighthizer has already shown that he is willing to take innovative management steps.

It could be that once Lockheed examines all the airport's assets and liabilities, it will have second thoughts about taking over BWI. There may be other private operators anxious to make Maryland an even better offer.

But the timing couldn't be better for advocates of privatizing government services. BWI appears to be an ideal guinea pig.